Before discussing types of accounting, I need your kind attention on the what is an accounting. You know accountancy have a wide range of the operation, it is not only the recording of the transaction or maintaining the books of accounts. It is from the opening of the transaction to the impact on concerning persons or organization, They may be an investor, vendor, vendor or governing authorities. So every accounting transaction have impact on the following parties.
- Management decision
- Government Authorities Tax
- Forensic Accounting
- Project-based Accounting
Main Types of accounting as mention below
- Financial Accounting. Recording and processing and reporting of every transaction of business entity as per governing accounting standard boards of the country, for external users, is called Financial Accounting. The purpose of business is to earn a profit, how much profit is earned by an organization that can be known through a financial statement. What is the business worth, how much there is increased in the worth of the business, this will be judged from the balance sheet. Existing or new investor make Horizontal analysis for the purpose of investment. The lender also gets the worth of business from these reports before giving a loan. Cash Flow Statement helps users to understand the mindset of management for utilization of Cash, where they are focusing, in operation or investment. following the rules and regulation of accounting standard board is compulsory.
- Tax Accounting, prepare and update the accounts as per tax regulatory authorities. Just like cost accounting, where focus is only to calculate the cost of goods, accounts are prepared and submit to the local governing tax authorities. Submitting the VAT, Sale Tax, Wealth Tax etc well on time after preparing as per their requirement. Here Tax Accountant collects all data from taxable accounts, exempted accounts and paid tax on the purchase of things or through utility bills etc. there company Providing Accounting information in the prescribed format to the external parties.
- Cost Accounting. As its name indicate, the costing of something. The basic purpose of that accounting is to minimize the cost of the product to earn more profit, or giving the qualitative product at the lowest price to the consumer (For Capturing the market more and more). In Cost accounting, all transactions, which are purely for made for the making of goods are recorded in separate. From purchasing the raw material to converting into finished Goods. Costing not only helps in setting the price of the product but also give information to the management for reducing the cost of it by taking corrective measures. In this type, there is no any standard or by law rules for making the reports. Every organization can do as feels best for their convenience.
- Management Accounting is concerned with the analysis of the business entity’s financial position. Management of the entity makes a decision for the growth of the business by taking steps for minimizing the risk to business loss, eliminating the irrelevant expenses, best utilization of the resources for entity growth and higher profit. Here again there is no standard for making reports. Its depend on the management what they required for analysis. Here focus is not only on monetary values in the current fiscal year, but they deal with all types of Financial and Economic aspects of organization from past to future. Management make short term decisions or long term future plan on the basis of, financial, Cost, Tax Accounting, Budging, forecasting.